Debt Collection Bill in Massachusetts Moving Forward

Legislation in the Massachusetts legislature is progressing which would shorten the statute of limitations by two years, halve the post-judgment interest rate, and exempt more individuals from having their assets garnished, according to a lengthy published report.

The bill, which was introduced by state Sen. Jamie Eldridge, has been approved by the Senate’s Financial Services Committee and is moving closer toward becoming law.

Even though the bill was introduced before the coronavirus pandemic struck the United States, the bill is being positioned as a means of protecting individuals who have lost their jobs due to COVID-19 and may be in a more difficult financial situation.

If enacted, the statute of limitations allowing lawsuits to be filed to collect on unpaid debts would drop to four years, from six. Also, the interest rate that judgment holders would be allowed to charge would drop to 6% from 12% currently, which is the highest rate in the nation. The bill would also exempt individuals who make less than 70 times the minimum wage from having their assets garnished, where most states allow individuals who make 40 times the minimum wage from garnishments. Collectors who plan to sue would also be required to provide notice of their intent at least 30 days before doing so under the proposed legislation. Judges would also be barred from automatically granting default judgments if an individual fails to show up for a hearing. Instead, the judge would have to schedule a second hearing to determine if a warrant is needed.

The garnishment provisions and lowering the statute of limitations are what concerns the industry the most, according to the report, which quoted David Reid from Receivables Management Association International. The report indicated that an earlier draft of the bill established the garnishment exception at those making 90 times the minimum wage.

“If we can find common ground, which I believe is possible, RMAI would be happy to support this legislation,” Reid said in the report. “RMAI has a long history of supporting pro-consumer legislation, but this bill still has a lot of work that needs to be done.”

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